HEAR - Turtle Beach gains amid potential 'war' with activist investor after board appointment (update)

Update 1pm: Updates shares, adds background on board appointment.

Gaming headphone maker Turtle Beach ( NASDAQ: HEAR ) rose 3.8% at least partly after an analyst said he sees the appointment of new director as potential a declaration of war with activist investor Donerail.

Turtle Beach (HEAR ) announced on Wednesday that it was appointing Terry Jimenez to the company's board of director.

"At face value, the release is benign," Wedbush analyst Michael Pachter wrote in a note. "However, the act may constitute a breach of contract and the declaration of legal war with activist shareholder, Donerail."

Pachter argued that the appointment of a new director prior to adding a Donerail principal may be a potential breach of a  contract that the Turtle Beach and Donerail had agreed to in May, which including Donerail not purchasing more than 9.9% of the outstanding shares.

Turtle Beach said in its press release on Wednesday that Jimenez’s appointment was is in furtherance of the commitments that the company made to Donerail and other shareholders in the May cooperation agreement. Also recall that Jimenez was of Donerail's nominees for the board back in March.

The parties worked collaboratively on the appointment of Jimenez, a person familiar told Seeking Alpha.

"With shares trading near book value, we think Donerail is positioned to buy a substantial portion of outstanding shares, and will resume its attempt to take over the company," Pachter, who has an outperform and $12 price target on Turtle Beach ( HEAR ) wrote. "Let the battle commence."

Pachter expects a "lot of noise" over the next few weeks and expects the shares to rise in the coming weeks should Donerail seek a takeover.

Donerail didn't immediately respond to Seeking Alpha email request for comment.

The new board appointment comes after Turtle Beach shares plunged 32% on Aug. 8 after the company announced that it had ended plans to sell itself.

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